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The Eritrean Airlines: Queen Bee III
In April of 2003, the ruling party in Eritrea, Peoples Front for Democracy and Justice (PFDJ) launched the Eritrean Airlines, dubbed the Queen Bee, with a great deal of fanfare. The decision to invest relatively significant resources, in hard currency, was strongly criticized by Diaspora Eritreans who consider the venture a pride-driven extravagance, given that the nation is in the middle of an acute draught that is affecting at least one third of Eritrea, while the pledged donations to alleviate the famine have been hard to come by, resulting in a shortfall of nearly USD 100 million. Defenders of the carrier explained that it was a good investment given the deteriorating airline industry, which has presented small nations like Eritrea the best opportunity to find basement bargain deals.
The purpose of this report is not to discuss the merits of owning an airline as both sides have presented good arguments to buttress their cases and the tools of assessment on who is right won't be known given the unaccountable nature of PFDJ. Rather, it is to discuss the management of an airline, a highly competitive industry. The report will show that the PFDJ, a highly secretive political organization that has not shed its communist background, still retains a hostile attitude towards the risk-and-reward motive of entrepreneurs. The report will also disclose the little-known prior experience of the PFDJ with two previous Eritrean airlines, dubbed here Queen Bee I and Queen Bee II to help readers draw conclusions on what the likely outcome of the new Queen Bee III is.
Since Independence Day, 13 years ago, this is the third time such an airline company was launched in Eritrea. Eritrean Airlines has had three different names. The first venture, the Airline Company, lasted 1992-94; the second, Red Sea Air, lasted one year (2000); the second, Queen Bee was launched in 2003. The previous two ventures closed shop in mysterious circumstances after operating for only a short period. The closure of the previous two ventures is believed to have been due to administrative problems resulting from the interference of the PFDJ's financial interests in the affairs of the privately owned companies. What The PFDJ InheritedIn 1991, getting to and out of Eritrea was extremely difficult. Roads from Ethiopia and Sudan were in bad shape and travel time was no more than 25 kms an hour on some roads. Air transport was even worse; there was no air-passage to Eritrea except for a few unannounced flights from Addis Ababa on old propeller aircrafts. Built by the Italians in 1931, Asmara Airport had seen very few improvements over the years. In 1962, the Ethiopian Emperor Haile Sellasie I annulled the federal arrangement between Eritrea and Ethiopia and declared Eritrea an Ethiopian province and, in his post-annexation visit, renamed the airport Yohannes IV. By the late eighties, particularly after PFDJ (then EPLFs) daring commando attack which destroyed dozens of fighter planes, "Yohannes IV" airport was transformed into an army garrison to protect Asmara from the advancing armies of the liberation fighters. In 1991, when the EPLF reached Sembel, they found a decaying airport, beaten up from long years of neglect and closure due to the sate of war all over Eritrea. With Independence, the EPLF fighters owned a rundown, silent and ghostly airport. Soon enough, Ethiopian Airlines established regular flights from Addis Ababa to Asmara. Other airlines followed suit. The traffic at Asmara Airport was growing exponentially. Between June and December of 1991, Asmara Airport handled approximately 40,000 passengers; by 1993 the number would grow to 140,000 passengers and 160,000 by 1994. The peak year was 1992, when the Asmara Airport handled a record 200,000 with many Diaspora Eritreans making their first trip to Eritrea after decades in exile. Even then, however, the Eritrean government was thinking in terms of owning a national carrier. In fact, the governments plans to own an airline were given higher priority over that of printing its own currency. The Eritrean government established the Eritrean Civil Aviation Authority (ECAA) under the Ministry of Transportation (MoT), which in turn formed the "Eritrean Airlines Company", a holding company. In 1993, Eritrea became a member of the International Civil Aviation Organization (ICAO) and ECAA joined the World Meteorological Organization (WMO), which serves not only the aviation industry but also, according to its mission, analyzing the weather patterns to provide early warning about impending drought and famine.
Queen Bee I: The Airline Company
In 1992, the government licensed a private company owned by three Eritrean entrepreneurs, Nussreddin Ibrahim, Habib Kebire (and a third silent partner) to operate an airline carrier. Although the businessmen had chosen a different name and branding for their carrier, the ECAA insisted that they name their carrier Eritrean Airlines. Under pressure, they succumbed to ECAAs insistence and accepted the branding of the carrier as Eritrean Airlines, part of the government's Airline Company. By spring of 1992, the company had leased a Romanian aircraft with contracted pilots and flight crew. In a much-publicized fanfare in the government media, reminiscent of the current hoopla, the "Eritrean Airlines" venture was launched in 1992. The leased plane was strategically placed in an unused tarmac of the airport, and tens of thousands Diaspora Eritreans visiting Eritrea for the first time would catch a glimpse of Eritrean Airlines as their planes landed at Asmara Airport and marvel at the efficiency of the PFDJ. People lined up to snap photos of the plane. The government media presented the undertaking as an economic breakthrough and a venture that would help revive the sagging tourist industry.
From the outset, there was confusion on whether Eritrean Airlines was a private concern or, as presented by the government, a national charter. The Eritrean Civil Aviation Authority organized a hasty crash course in flight attendance and announced the names of air attendants who "successfully completed the course" on its media, suggesting that the crew would now work for Eritrean Airlines. The owners of the carrier company, however, already had a Romanian crew aboard the single aircraft they operated.
The airline made flights to Egypt, Sudan, Saudi Arabia and few stations in Europe but the absence of clearly defined roles for the two parties, resulting in frequent administrative interference by the government, foreshadowed the airlines demise.
For one thing, the ECAA was in charge of ticket salesit took over the Ethiopian Airlines sales officeand the business was at the mercy of the government for its revenues. The government was also in charge of all passenger and cargo handling at Asmara Airport. The ECAA began to treat the private business as its own division and the relationship came to a disastrous conclusion in the summer of 1994. In the summer of 1994, many travelers with Eritrean Airlines tickets were stranded in Europe when the only aircraft in the Airline Company suddenly disappeared and ended up in its home base in Romania. Apparently, the captain had flown back to Romania without giving notice to anyone. An informed source says, "the captain could not take it anymore; he was being bossed by the PFDJ and the owners of the company." Many passengers, the majority of them Eritreans heading home for the summer, were stranded in Italy from where they were supposed to take the connecting flight to Eritrea. According to an insider, "the owners of the Airline company claimed the PFDJ owes them money for ticket sales in Eritrea that they never received, so, they simply collected the money from the ticket sales in Europe and balanced their accounts with the PFDJ". Fearing ramifications, since, legally, the Eritrean Airlines has to honor the tickets and provide a carrier for the ticket holding passengers, the PFDJ immediately arranged with SudanAir to ferry all the stranded passengers to Asmara in time for the summer vacation season. (Within months, PFDJ would break its diplomatic contact with Sudan.) SudanAir made the last flight on behalf of the Eritrean Airlines, which silently disappeared. At the time, the ECAA's was earning around $1 million yearly derived from airport handling and airline fees and charges of Eritrean Airlines. Meanwhile, the government was securing grants from European nations towards rehabilitating the airport. In 1994, the French Development Fund granted the Eritrean government FF12 million to repair the airfield and FF 5 million for the purchase and installation of a communications system. Germany granted Eritrea DM 3 million worth of technical assistance to install a new Instrument Landing System (ILS), which was operational in July 1994. The runway was extended to 3900 meters and, according to its literature, "Airbus consortium test landed a wide-bodied A330 in August 1994."
Queen Bee II, aka The Red Sea Airlines
After the failure of the first venture, Eritrean authorities were trying to attract foreign investors for a joint-venture airline operation affiliated to Red Sea Corporation (09), the economic arm of the PFDJ. All of the airlines that flew to Asmara were boasting of high traffic and a lucrative market. Lufthansa made the most from travelers originating from the US and Europe and it made up to four flights per week during the peak season of summer. Ethiopian Airlines made the most from its transit passengers who originated in the Middle East and Ethiopia and the rest of Africa. Mr. Abraha Ghermazion, then the Eritrean Airline manager (ECAA) made statements then that the government was looking into four or five aircrafts to start operations by 1995. However, he didn't stay in office long enough to realize his dreams and was soon "frozen" [terminated from his position but paid hush salary.]
Mr. Stifanos Afwerki was named his replacement in 1996 and was put in charge of both the ECAA (including the Eritrean Airlines) and the Asmara Airport. Observers believe that he at least attempted to separate the Civil Aviation affairs from the airport handling and the carrier company. The same year, ECAA formed a search and rescue unit to meet compliance requirements of international aviation standards. Towards the end of the year, Asmara Airport was handling over 1,000 passengers a day and cargo for the year totaled about 3000 tonnes. In 1997, Mr Paulos Kahsay, an Ethiopian Airlines veteran who joined the EPLF in 1979, was named head of ECAA. Under the leadership of Mr. Paulos Kahsay, the government had an ambitious $100 million investment plan that included expanding the apron; building a new cargo terminal; expanding the passenger terminal and maintenance facility and acquiring communication, navigation, surveillance, fire-fighting and rescue service equipment. However, the government was still having difficulties attracting qualified technicians from Europe and the United States.
The governments plans to launch its own carrier was tied to is development project in Dahlak Kebir Island. The USD 250 million project was envisioned as a casino and resort facility which would ferry wealthy Gulf Arabs on chartered Eritrean airlines across the Red Sea. According to the Economist (Whore Wars), the government in Yemen had its own casino plans targeting the same audience, which was partly the cause of the short but bloody border conflict between Eritrea and Yemen in 1996. (Seven years later, both nations have abandoned their projects.) Eritreas Ministry of Tourism contracted with Mr. Ahmed Amin, a renowned photographer to publish a tourist magazine and develop a tag line. He came up with three seasons in two hours, which is similar to the 13 Months of Sunshine he had developed for Ethiopian Airlines magazine, wbet, much earlier. (Ahmed Amin lost his hands in the arms depo explosion that followed the fall of Addis Abeba in 1991. Ironcially, he died in an Ethiopian Airline plane crush in the Sychelles in 1996.)
When the Eritrea-Ethiopia border war erupted in 1998, many airlines discontinued their flights to Asmara. The Ethiopian Air Force bombing of the airport in May 31, 1998 resulted in a massive insurance hike and an immediate discontinuation of flights to Asmara, a move that wasnt reversed until President Clinton brokered an air raid moratorium in 1999.
In 2000, a Saudi businessman from "the Yemani family", backed by a wealthy Saudi banker (reportedly Bin Mahfouz), launched the Eritrean airlines for the second time. An ex-Ethiopian air force pilot, an Eritrean by the name of Mr. Aynom Mebrahtu, became the director of the new venture. With a capitalization of USD 5 million, the company was a partnership between the Saudi businessman (40%) and the PFDJs Red Sea Corporation (60%.) With a single leased aircraft, the airline made circular flights from Asmara to Sanaa, Dubai-Jeddah and back to Asmara. It also flew roundtrip to Djibouti, a nation that the PFDJ was quarreling with. The airline inherited the same problems of the earlier airlines venture: once again, there was no clarity on the lines of authority and responsibility and the Red Sea Airlines closed shop less than a year after its launch.
Queen Bee III: The Third Eritrean Airlines
In April of 2003, Eritrean Airlines was launched for the third time. Unlike the previous two ventures, this time the airline is fully financed by the government that leased a 14-year Boeing 767 aircraft from Boeing Aircraft Trading Corporation. Egypt Air formerly owned the aircraft. The Red Sea Corporation, the financial arm of the PFDJ, is a partner in the new venture and Mr. Hagos Gebrehiwet (Kisha), the PFDJ's bagman, has given the airline his full support.
The top man in the new venture is Captain Asres, a veteran pilot of the Ethiopian Airlines. Most of the staff and management are ex-Ethiopian Airlines employees who were stripped of their Ethiopian nationality and deported from Ethiopia during the 1998-2000 border war.
Taking advantage of the symbolism value of peoples need to own an airline that carries their national flag, the PFDJ has tried to promote its latest venture with maximum patriotic feat. The launching of the airline has been used as a metaphor for the rise of a war-torn nation, expressing self-reliance against all odds. Without explaining the relationship, the government has also considered the launching of this third airline as an extension of the Warsay-Yekaalo Project, the governments compulsory manual labor service imposed on all military-age citizens. The project has been planned and executed by the Eritrean government without the knowledge of the Eritrean public. The motivation of many of its managers, many of whom are recent deportees from Ethiopia, seems entirely emotional: driven not by business consideration or even patriotic zeal, but an effort to get even with the Ethiopian government.
Conclusions The true test on whether the PFDJs latest venture is a sound one, whether, as its proponents say, is a result of an excellent business opportunity or whether, as its detractors say, is an unnecessary extravagance in a high risk industry, can only be answered by independent auditors who would review the airlines financial statements annually and provide the report to the public, who are, after all, funding it. In this regard, the PFDJ is woefully inadequate: none of its institutions are audited; moreover, there are no independent auditors in Eritrea. More important than the financial health of the company is the safety and security of its passengers. In this regard, as well, there is cause for concern: PFDJ-owned businesses have shown a pattern of cutting corners (see Gedab Investigative Report on Massawa Airport) if it will save money or time. The PFDJ will have to change its culture of secrecy and dodging responsibility if it hopes to win the confidence of people, specially in a high-risk business like the airline industry. 1 The PFDJ should see the Eritrean people, and not itself, as the Bee. It is its view of itself as the bee that has built its destructive tendency to expect the peoplethe workers, the drones--to sacrifice all they are and all they own, for its very survival, while it feels free to sting anyone at will and live with no one challenging its royal authority. 1- Since 1991, Eritrea witnessed "three hijackings" which were not announced on the media for fear of negatively effecting international carriers flying to Eritrea |
